This update covers: the background to the mis-selling issue, how the FCA scheme works, our assessment of its limitations, the case for court claims, the timeline, and critically, what you must do if your lender contacts you.
For years, many motor finance agreements involved discretionary commission arrangements (DCAs). Brokers (dealers) received commissions that were not disclosed to customers, and could increase your interest rate specifically to boost their own commission — a direct conflict of interest.
In August 2025, the Supreme Court ruled in Johnson v FirstRand Bank Ltd. The Court confirmed these practices created “unfair relationships” under the Consumer Credit Act (CCA) 1974, making lenders legally responsible for the brokers’ actions. Following this ruling and a period of formal consultation — to which Courmacs formally contributed — the FCA published its final rules (PS26/3) on 30 March 2026.
Commissions paid to dealers were not disclosed to consumers at the point of sale.
Dealers could raise your interest rate to earn a higher commission, entirely without your knowledge.
Courts have confirmed lenders bear responsibility for broker conduct under the Consumer Credit Act 1974.
The scheme covers motor finance agreements taken out between 6 April 2007 and 1 November 2024 where commission was payable by the lender to the broker. The headline figures are as follows:
The FCA has designed a two-tier system. Most consumers will fall under the Hybrid Remedy. A small minority will qualify for Full Commission restitution.
A 17% downward adjustment to your APR is applied to calculate the estimated loss figure for the Hybrid Remedy.
A 21% downward adjustment applies to earlier agreements, reflecting higher historical losses in that period.
Compensation is capped at 90% of commission paid or the total cost of credit at the lowest 5% of market rates — whichever is lower. If your APR was already in the lowest 5%, you may receive nothing.
For more detail on how the FCA calculates redress under PS26/3, you can read the full policy statement on the FCA website.
The scheme applies where a consumer was not clearly informed about at least one of the following arrangements: a Discretionary Commission Arrangement (DCA); a High Commission arrangement (at least 39% of total credit cost and 10% of the loan); or a Tied Arrangement giving the dealer exclusivity or a right of first refusal.
The following consumers are excluded entirely and must pursue alternative routes:
Consumers who have already successfully complained to the Financial Ombudsman Service, had a court determination, or accepted redress from their lender.
Agreements in the top 0.5% of all loans by value in a given year. These consumers retain the right to pursue individual complaints or court claims.
Agreements where no commission was payable, where commission paid was £120 or less (pre-April 2014) or £150 or less (from April 2014), or where no interest was charged at all.
Approximately 64,000 agreements where the APR charged was in the lowest 5% available in the market at the time, on the basis those consumers were not materially overcharged.
If you are unsure whether any of these exclusions apply to your agreement, do not worry. We will assess your individual position and advise you accordingly.
Under the scheme, lenders are permitted to reject or reduce compensation in certain situations. These are known as rebuttal arguments and they are often complex, fact-specific, and may be applied incorrectly or too broadly.
We will review any such decisions carefully and challenge them where appropriate.
The FCA has framed this as a balanced and fair scheme. We respectfully disagree in several important respects. Whilst the scheme provides a mechanism for compensation, there are structural problems with its design that consumers should understand before accepting any offer made under it.
Under the scheme, lenders themselves determine whether compensation is payable and how much. The Financial Ombudsman Service can only assess whether the lender followed the scheme rules, not whether the consumer deserved more under wider legal principles.
The hybrid formula is a blunt instrument. It does not examine individual facts, specific circumstances, or the full range of court remedies. For many consumers, the true loss assessed by a court could be materially higher.
The final scheme covers 12.1 million agreements, down from 14.2 million proposed. The FCA tightened eligibility in response to industry pressure. A meaningful number of consumers with genuine losses will not be covered.
Consumers can no longer challenge the interest rate applied to their compensation, removing a lever that could have increased awards for those who suffered loss over a long period.
The scheme necessarily involves averaging, standardisation, and caps. Cases involving serious misconduct, or circumstances within the Full Commission category, may not be fully reflected by a standardised formula.
Given that the FCA’s published rules (PS26/3) extend to over 800 pages, we have instructed an independent expert economist to carry out a detailed technical review of the scheme’s compensation methodology, interest rate framework, and eligibility thresholds. This will allow us to identify cases where the standardised formula may produce a materially lower outcome than an individually assessed court claim. We will provide a further update once that review is complete.
The FCA has acknowledged that consumers may choose not to participate in the redress scheme and instead pursue claims through the courts, where they may receive more (or less) depending on the facts. For clients whose cases are properly prepared and legally advised, the position is very different from an unrepresented individual.
Courts apply the full discretion under section 140B of the Consumer Credit Act 1974 to make any order considered just and equitable, not constrained by an averaging formula.
The Supreme Court in Johnson v FirstRand confirmed unfair relationships in clear terms. The legal landscape is significantly more certain than the FCA implies.
In DCA cases with high commission, there is a strong likelihood that courts may award considerably more than the scheme formula produces, particularly where the dealer's financial incentive was strong.
As SRA-regulated solicitors, we can litigate on your behalf and assess whether a court claim is likely to produce a superior outcome for your specific case. Claims management companies cannot do this.
We are not advising every client to go to court. Our point is simpler:
do not assume that accepting the scheme offer automatically represents the best outcome for you. That is exactly the assessment we will be conducting on your behalf.
Some claims may be rejected by lenders on the basis that they are out of time (legally time-barred).
However, the FCA has confirmed in PS26/3 that where key information was not properly disclosed, the normal time limits may be extended. In practice this means….
We will assess and challenge this where appropriate.
The FCA has set a phased implementation timetable. The dates below are the key milestones you should be aware of.
The Motor Finance Consumer Redress Scheme (PS26/3) is now confirmed and legally in force.
Lenders must begin formally assessing claims for agreements taken out from April 2014 onwards.
The same assessment and notification process begins for agreements taken out before April 2014.
Consumers who have already complained must be told whether compensation is due and how much.
Lenders must proactively reach out to consumers who have not yet complained but may be owed money.
If you have not been contacted by your lender, this is the last date to submit a complaint under the scheme.
The FCA expects the vast majority of redress payments to have been made to eligible consumers by this point.
If your lender contacts you with an offer at any point during this timeline, do not respond or accept anything before speaking to us first. Acceptance is final and cannot be undone.
If you accept a compensation offer from your lender, whether through the redress scheme or otherwise, your claim will be treated as closed. You will not be able to reopen it.
Lenders will seek to settle claims efficiently for themselves. Under the scheme, they control the initial determination. The offer they make may be calculated at the lower end of what the rules permit. Without independent advice, you may not know this.
Do not accept any offer, sign any documents, or click any acceptance links sent by your lender.
Do not respond to the lender confirming or rejecting their offer before speaking to us.
Send us a copy of any correspondence received. We will review the offer and advise on the best course of action.
Some lenders may not make it clear that accepting a settlement offer could leave you liable to pay our legal fees from any compensation received, without having benefited from our full advice. If you have inadvertently registered with another claims management company or law firm, including through comparison websites or social media, please let us know immediately. Only one firm can act for you on a single claim.
Only use this wording if you have not already confirmed who represents you. If you are unsure whether you have done this, contact us before sending anything.
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If you have inadvertently registered with another claims management company or law firm, including through comparison websites or social media, please let us know immediately. Only one firm can act for you on a single claim, and duplicate representation may delay or complicate your case.
Our success fee is only payable if your claim succeeds and is deducted from any compensation you receive.
You will never receive a bill from us for an unsuccessful claim.
If you receive any correspondence from your lender, another law firm, or a claims management company — or if you have any questions — please contact us immediately.
Please note we are currently experiencing a high volume of enquiries. We aim to respond within 5 working days.
We are SRA-regulated solicitors. We are bound by duties of care and confidentiality that go beyond the obligations of a claims management company. We are here to help.
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